Legal Definitions - BIOCOB

BIOCOB stands for Buyer In the Ordinary Course Of Business.

In the context of secured transactions law, a BIOCOB is a special type of buyer who receives certain protections when purchasing goods. To qualify as a BIOCOB, an individual must meet several specific conditions:

• They must purchase specific goods.
• They must act in good faith, meaning honestly and without any intent to defraud.
• They must not know that the sale violates someone else's legal rights in those goods (for example, if the goods are subject to a lien or a security interest).
• They must buy the goods in the usual and customary way that such goods are sold.
• The seller must be in the business of selling goods of that particular kind.

When a buyer qualifies as a BIOCOB, they generally take the goods free of any security interest or lien created by the seller, even if the buyer knows of its existence, as long as they don't know the sale itself violates the rights of the holder of that security interest.

Examples:

• Example 1: Car Purchase from a Dealership

  Imagine Sarah visits "Premier Auto Sales," a reputable car dealership, and purchases a new SUV. She test drives it, negotiates a fair price, and completes all the standard paperwork. Unbeknownst to Sarah, Premier Auto Sales had financed its inventory through a bank, and the bank holds a security interest (a lien) on all the cars on the lot until they are sold. When Sarah drives off with her new SUV, she is a BIOCOB.

  How this illustrates BIOCOB: Sarah bought a specific good (the SUV) in good faith, without knowing that her purchase violated the bank's rights (she only knew the lien existed, which is common for inventory, but not that her purchase was a violation). She bought it in the ordinary course of business from a seller (Premier Auto Sales) who routinely sells SUVs. Because she is a BIOCOB, she takes ownership of the SUV free and clear of the bank's security interest, even though the bank had a claim against the dealership's inventory.

• Example 2: Designer Handbag from a Boutique

  David buys an expensive designer handbag from "Chic Boutique," a well-known luxury accessories store. The boutique owner had previously used some of her high-value inventory, including this specific handbag, as collateral for a business loan from a private investor. The investor's loan agreement stated that the boutique could not sell any collateralized items without prior approval. David, unaware of this specific restriction or the loan's terms, simply chose the bag, paid the listed price, and received a receipt.

  How this illustrates BIOCOB: David purchased a particular good (the handbag) in good faith, believing he was making a legitimate purchase. He had no knowledge that the sale itself violated the private investor's rights. He bought it in the ordinary course of business from Chic Boutique, which is in the business of selling luxury handbags. Therefore, David is a BIOCOB and owns the handbag free of the private investor's claim, even if the boutique owner technically breached her loan agreement.

• Example 3: Used Equipment from a Private Seller (Not a BIOCOB)

  Emily sees an advertisement online for a high-end commercial espresso machine, listed at an unusually low price by a private individual, Mark, who claims he's "just clearing out his garage." Emily meets Mark at his home, pays cash, and takes the machine. Later, she discovers that Mark had financed the espresso machine for his cafe business through a commercial lender, and the lender still holds a security interest in the machine because Mark defaulted on his loan. The lender now seeks to repossess the machine from Emily.

  How this illustrates why Emily is NOT a BIOCOB: While Emily bought a specific good in good faith, she did not buy it from a seller who is in the business of selling commercial espresso machines. Mark was a private individual, not a dealer. Furthermore, buying a commercial machine from a private home, especially at an "unusually low price," might not be considered buying in the "ordinary course of business" for such an item. Because Mark was not a seller of goods of that kind, Emily does not qualify as a BIOCOB and may not be protected from the commercial lender's claim.